Monday, April 24, 2017

SOEs Buy 30% NE China Corn in 2016/17

Three State-owned companies purchased 30.562 million metric tons of corn from China's 2016/17 harvest, according to a Ministry of Agriculture update on the agricultural economy today. The purchases by the three companies--Sinograin, COFCO, and China Aviation--together accounted for 30.7 percent of all corn procured in northeastern China during the 2016/17 marketing season.

According to figures released at today's meeting, a total of 99.53 mmt of corn had been procured from the 2016 crop in the northeastern provinces as of April 23, 2017. That total is 48.316 mmt less than during 2015/16. The sharp decline reflects the ending of the "temporary reserve" program for 2016/17. While there was no formal price support program during 2016/17, the three state-owned companies were urged to buy corn in the northeastern provinces to ensure that farmers were able to sell their grain. Presumably, Sinograin, COFCO, and China Aviation are still holding much of the corn they purchased.

Chinese corn prices plummeted during 2016/17, even with purchases by the three companies propping up the market. The Ministry of Agriculture reported that corn prices received by farmers in the northeastern provinces were down as much as 30 percent from a year earlier. The National Bureau of Statistics reported that producer prices for corn were down 20 percent during the first quarter of 2017 compared with a year earlier.

In a separate announcement, Henan Province announced that corn will no longer be given subsidies for agricultural insurance premiums this year. This move appears to be meant to discourage corn production this year. The Province reported that its area planted in corn fell for the first time in 15 years last year, but the decrease was only 27,000 hectares on total planting of over 3.3 million hectares.